Christian Paradis, Minister of Industry and Minister of State (Agriculture), responds to a question during question period in the House of Commons, September 20, 2011. Paradis is offering more detail on the changes to the way Ottawa will review large foreign takeovers in the country. (THE CANADIAN PRESS/Sean Kilpatrick) | CP

OTTAWA - The federal government is raising the monetary threshold for a review of a foreign takeover of a Canadian company to $1 billion from $330 million over a four-year period.

Ottawa is also creating a formal mediation process under the Investment Canada Act that will offer a voluntary means of resolving disputes when the minister believes a foreign buyer has failed to live up to its obligations.

"Canada has a strong investment climate and these targeted changes will ensure that our foreign investment review process continues to encourage investment and spur economic growth," Industry Minister Christian Paradis said in a statement Friday.

"Foreign investment is vital to the Canadian economy. It helps Canadian companies find new capital and enables them to expand, innovate and create jobs for Canadians."

The details released Friday follow a promise last month by the federal government that it would provide more disclosure on decisions to block foreign takeovers that it judges would be detrimental to Canadian interests.

Ottawa also said it would accept security bonds from foreign companies should a court levy penalties on a foreign investor for breaking contractual commitments.

The long-promised update to the rules follow a decision in 2010 by then industry minister Tony Clement to veto the takeover of Potash Corp. (TSX:POT) by Anglo-Australian mining firm BHP Billiton. It was deemed that the takeover did not meet the key "net benefit" test, a closed-door review of whether a particular investment would benefit Canada.

Opposition critics said Friday that the government did nothing to clarify what a net benefit would be in the regulatory changes.

"That's the one that brings a lot of upheaval and a lack a stability into communities and into labour and industry. That's what really needs to be defined," NDP deputy industry critic Dan Harris said

Liberal industry critic Geoff Regan said what Canadians and investors really want is to know what constitutes a net benefit to Canada.

"It is very disappointing that the Conservatives have again refused to clarify the net benefit test and continue to block all attempts to have the industry committee study the Investment Canada Act," Regan said.

The changes to the Investment Canada Act to increase the review thresholds were passed several years ago, but the government did not make the needed regulatory change until Friday.

Under the changes, the investment review threshold will immediately rise from $330 million in asset value to $600 million in enterprise value for two years, then to $800 million for two years, then to $1 billion.

The government noted that the change from book value to enterprise value will better reflect the worth of a business.

The change is key when it comes to service of knowledge-based industries where businesses have few hard assets and instead rely on intellectual horsepower such as the tech industry.

The proposed mediation process comes in the wake of an acrimonious fight between Ottawa and U.S. Steel over broken promises the company made to secure approval of its purchase of Stelco in 2007.

The government and U.S. Steel fought a protracted court battle before settling the case late last year with an agreement that saw the company promise to keep producing steel in Canada for at least another four years and make major capital investments at its Canadian mills.

The federal government has blocked two takeovers under the Investment Canada Act. In addition the BHP's hostile bid for PotashCorp, Ottawa killed a deal by MacDonald Dettwiler and Associates (TSX:MDA) to sell its space business to a U.S. company.